Part 2/16:
One of the central themes discussed is the persistent inversion of the yield curve—specifically, the US Treasury yield curve, which has remained inverted for over 23 months. Historically, such inversions have reliably forecasted recessions within 8 to 10 months, making this an essential indicator for predicting economic downturns.
What does a yield curve inversion mean?
It indicates that short-term interest rates are higher than long-term rates—a phenomenon driven by the market's expectation that the Federal Reserve's tightening of monetary policy will slow future economic growth. When investors anticipate slower growth, they demand higher yields for short-term borrowing but accept lower yields for long-term bonds, expecting the economy to weaken.